FOR IMMEDIATE RELEASE

London – 22 April 2021

The cross-party Treasury Committee has today published unanimously-agreed recommendations on greening the financial system, following a two-year inquiry.

The committee recommends that the Bank must “explain its thinking, as to what measures it might consider appropriate for the capital regime to better accommodate the climate risk associated with different investments” and “set out its views on the options for amending the capital regimes to reflect its new remit”.

This comes after Sarah Breeden, Executive Director for UK Deposit Takers Supervision at the Bank of England, stated on Sky News earlier today that the Bank of England is not currently considering altering banks’ capital requirements to reflect climate risk.

MPs also made a wide range of other recommendations for greening the financial sector ahead of COP26, including that the Treasury widen the scope of the mandatory climate-related financial disclosure regime, “work at speed” to develop a green taxonomy that could “exceed” the EU taxonomy in aid of the UK’s climate goals, and prevent “greenwashing” of financial products.

David Barmes, Economist at Positive Money, said:

“Unlike recent industry alliances, the Committee is going in the right direction by recommending that the Bank of England consider increasing capital requirements for high-carbon lending to more accurately reflect the huge risks to financial and planetary stability involved.

“The Committee recognises that a taxonomy defining which activities should be labelled as ‘green’ is essential to align finance with the Paris Agreement, but even more importantly we need to define which activities are ‘dirty’. The UK taxonomy must benefit from extensive public consultation and be far more stringent than the disastrous EU taxonomy, which is blatantly detached from science.

“As banks continue to pour hundreds of billions into planet-wrecking fossil fuel projects, we urgently need proper regulation, not more greenwashing. With its new mandate, the Bank of England and regulators have the green light to take a more active role in shaping a green financial system.”

Notes

• The full report and recommendations are available on the Treasury Committee website: https://committees.parliament.uk/committee/158/treasury-committee/news/154672/treasury-committee-publishes-net-zero-and-the-future-of-green-finance-report

• Sarah Breeden appeared on Sky News today to explain how the Bank of England is putting its new mandate into practice: https://news.sky.com/video/winds-of-change-on-climate-for-bank-of-england-12283675

• Mark Carney’s industry alliance, the Glasgow Financial Alliance for Net Zero, has received widespread criticism from civil society: https://www.ft.com/content/77a8292d-2e7f-43a1-9062-2e639c1e6b2a (see also joint statement by CSOs: https://www.banktrack.org/article/new_bank_climate_initiative_fails_to_grasp_urgent_need_to_end_finance_for_fossil_fuels)

• In evidence submitted to the Committee last year, Positive Money recommended that the Bank of England use forms of “green credit guidance” to “increase the amount of capital lenders need to hold against high-carbon loans to accurately reflect the risk”: https://committees.parliament.uk/writtenevidence/10396/html/

• Positive Money’s ‘Green Central Banking Scorecard’ recently revealed the huge amount of action central banks need to take to align finance with governments’ environmental commitments: https://positivemoney.org/publications/green-central-banking-scorecard/

• Positive Money campaigns for a money and banking system which supports a fair, democratic and sustainable economy. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of over 65,000 supporters. www.positivemoney.org

• For more information or to arrange a briefing/interview with a spokesperson, please contact press@positivemoney.org.uk or Anna Pick on 07948802104